Snippit from Rightline Report of last night.
rightline.net
This rebound has just started and will continued to be fueled by put
and short covering especially as options expiration draw closer.ÿ
This move no doubt will have jiggles and hiccups along the way, but
as we draw closer to earnings season that begins in January, the
powerful earnings that were reported last quarter and that are due to
be reported for the fourth quarter will again become a driving force.ÿ
This group has the numbers.
Tomorrow could go either way.ÿ Friday is employment report Friday.ÿ
It has the potential to dramatically move the markets - especially if
it comes in on the inflationary side.ÿ If it were to do so, the
markets will tank.ÿ That is why many traders are reluctant to
establish new positions tomorrow leading into the report.ÿ
Additionally, traders who have big profits in positions may be
inclined to pull some of it off the table.ÿ I am inclined to believe
that the Oil Drillers will open up tomorrow and flatten out as the
day progresses.ÿ Friday, depending on the employment report, they
should continued to show strength.
My note: He goes on to talk about the OSX and then writes:
As you can see, a lot of options in the OSX expire in two weeks.ÿ
Also, there is a lot of short (put) interest in the Oil Drillers.ÿ
These were good plays when the selloff in the Drillers was going on,
but they are less so now that the sector is moving up.ÿ As traders
and of even greater impact, the hedge funds, close out their short
positions, it creates sudden and often powerful buying pressure
because to close a short position, you have to buy to cover.ÿ All of
a sudden, the hedge funds are giving up and closing out the puts or
buying common stock against these puts.ÿ Soon any profit the put
holder had vanishes in the ensuing rally in the stocks propelled by
the very shorts that pulled them down in the first place.ÿ All of a
sudden, even though nothing has changed fundamentally, the stocks are
moving sharply.ÿ Just as they did when they were selling off. |
